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Appeared on: Tuesday, February 03, 2004
File-swap ruling heads back to court

Lawyers representing the entertainment industry and file-swapping companies will meet in California on Tuesday as a federal appeals court hears the first arguments in a case likely to shape the future of online file swapping, as ZDNet reports.

The 9th US Circuit Court of Appeals is reviewing a lower court decision made last spring in which a federal judge ruled that distributing decentralised file-swapping tools such as Grokster and Morpheus was legal, and that their parent companies bore no legal liability for copyright infringement occurring on those networks.

The ruling was a surprise setback for record labels and Hollywood studios, which had previously won rulings forcing Napster and other file-swapping companies to close, and had expected the same result against Grokster and Morpheus parent Streamcast Networks. Those companies, now defending their win in the higher court, say the issue is bigger than their products, or even the file-swapping industry.

The appeals court, like the lower court before it, ultimately will determine whether technology companies are responsible for the illegal activities of people who buy or use their products, an issue that resonates well beyond the peer-to-peer world.

Few would disagree that file-trading networks are used largely for the unauthorised exchange of copyrighted material. Indeed, the record industry's lawsuits against individual computer users who are trading songs online using services such as Kazaa continue unabated, with the latest round filed in early January.

File-swapping advocates say that doesn't necessarily mean the companies that distribute the peer-to-peer software should be held responsible, however. Unlike file-swapping pioneer Napster, which operated a central server that served as a directory service for its network, the new generation of file-swapping companies produce software but do not operate the networks themselves, these advocates say. Moreover, the technology can be used for legal purposes, they say.

In his decision last April, federal Judge Stephen Wilson agreed, comparing file-trading software to the videocassette recorder, another technology once opposed by Hollywood on copyright grounds.

The recording industry and Hollywood studios argue that Wilson erred in his analysis, however. They point to earlier decisions in the Napster case, in which judges said that the VCR argument, known as "substantial noninfringing use" defence in legal circles, does not apply if a company knows that its products are being used illegally.

In Napster's case, the recording industry sent 12,000 notices that piracy was taking place on the network, Recording Industry Association of America attorney Matt Oppenheim said. In this current case, the RIAA has collectively sent 8 million notices to Grokster, Streamcast and co-defendant Sharman Networks, the owner of the Kazaa software. Sharman is not part of the appeal, due to legal issues that have separated its case from the other two.